Are credit cards for teens a good idea? Credit card companies are selling credit cards not only to adults, but to tweens and teens as well. Before you spit out your coffee, laughing over the greed of large financial corporations, though, you might want to listen to parenting experts, some of whom claim that teen credit cards are a great idea that teaches minors financial responsibility.
Also known as “junior” credit cards, teen cards are actually not credit cards at all – laws prohibit lending to minors. A teen’s parents actually own the credit card – oh, goody, if you are a parent, you can enjoy all the responsibility of another credit card when you teen wants one. The teen cards in fact work very similarly to debit cards. The secure cards are loaded up with cash and can be used at any merchant who uses credit cards. Teens and tweens can check their balance online, just like with any credit card.
Credit cards are a big responsibility, even when mom “officially” owns yours. Overcharges and overdrafts are very possible with teen credit cards, and those overcharges can add up. Plus, teens using plastic all the time might get the impression that money is free. After all, they don’t have to handle it and it just appears easily on their card. Identity theft is still an issue, since teens need to provide their signature and some information – via the card – to merchants. Cash, with all it’s disadvantages, is still anonymous. Most studies have shown that adults overspend when they pay with plastic rather than cash. No studies have been done on teens and tweens, but it’s at least possible that plastic works the same way with kids.
For everyone who thinks that teenage years and the pre-teen years are far too early to start a love affair with plastic, though, there are those who claim that tween credit cards and teen credit cards can be great for kids. Credit cards are in fact more secure in some ways. If a retailer cheats a teen, there is a record of it. And while lunch money is easy for a bully to nab – or a teen to lose — credit cards are at least potentially easier to keep track of and easier to cancel when lost or stolen. Plus, some parenting experts claim that credit cards can teach teens good financial habits – such as creating budgets or keeping track of spending through online accounts. Many parents like the fact that teen credit cards are a form of security – that a teen always has a way to pay for a cab home when the driver is drunk or always has a way of paying for a phone call if a cell phone malfunctions.
If you’re a parent considering getting a card for your teen, take things slow. Talk to your teen or tween about credit and what it means and help them choose a card with good rates and benefits. If your child does overcharge, make sure that they have to bail themselves out. Start with small amounts on the card and only build up as your tween or teen handles responsibility well with smaller numbers. Be ready to cut up the card and close the account if spending gets too far out of control. You may be pleasantly surprised, though, at the way your tween or teen takes to their allowance in plastic form.
From Lynnae: So what do you think? Are junior credit cards a good idea? And does anyone want to guess what I say?
Photo by The Consumerist.
If you like this article, please sign up for free weekly email updates.
I'm just an average mom, trying to live a frugal life and get out of debt. I write about things that have (and haven't) worked to improve my family's financial situation. What works for me may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
In accordance with FTC guidelines, I state that I have a financial relationship with companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.
Any references to third party products, rates, or websites are subject to change without notice. I do my best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.